Table of contents
Both corporate strategy and corporate culture require hard choices and tough trade-offs. But it’s necessary to make them—in alignment—to remain competitive in increasingly crowded markets.
A (Very) Brief History of Corporate Strategy
Before the 1980’s, most executives thought corporate strategy was a wasted effort. That may sound ludicrous now, but the prevailing wisdom of the time was very much, “build a good product and people will buy it.”
After all, that simplicity had served organizations well since the very founding of corporate management, and this new idea called strategic planning which required you to take deeper stock of your market, customers, and competitors didn’t seem necessary.
But of course, times changed, and the ability to make a good product became more widespread (especially around the globe). Suddenly, “good” products were everywhere and consumers had to rely on more than product quality to determine which purchases to make.
Enter Michael Porter. An academic by training, he taught executive teams that strategy is a process of “deliberately choosing to be different” in order to “deliver a unique mix of value.” In a world rife with good products, Porter catalyzed a revolution of companies choosing to be different through elements like price, features, market focus, functionality, support, and brand.
Through his writing and consulting, he taught countless executive teams to embrace hard choices, explicit tradeoffs, and even sacrifices in order to pursue differentiation and, as a result, growth. Today we live in a world with near-endless varieties of goods and services all vying to serve our individual needs. And while nearly forty years later, corporate strategy, as a process, continues to evolve with the times, the idea of necessary tradeoffs, sacrifices, and hard choices remains as essential as ever to good strategy.
How Strategy Impacts Culture
But what about organizational culture? Are hard choices required in that domain, too?
The easy answer is, “of course.” After all, organizational culture is the “how” of strategy. If strategy dictates tradeoffs, culture is the means by which those tradeoffs are executed. Without culture, strategy is a set of toothless intentions on a page. For every strategic tradeoff, there is a cascading set of cultural tradeoffs required to make it possible.
Take cost leadership, for example. One of Porter’s three generic strategies, cost leadership aims to build advantage by being the lowest-cost producer in one’s category. To truly own that position, the entire organization has to become margin-obsessed, not just in what it pays for raw goods, but in how it reaps performance from every single team member. When strategy aligns with culture, a cost leader is often also a rationality leader, a time management leader, a collaboration and coordination leader, a lean-teams leader, and so on.
In terms of company cultures, it’s not just OK to be different, it’s strategic.
If every strategy should bring with it hard cultural tradeoffs, why then when we look around at organizational cultures do we see so many companies chasing parity and not difference? Too many organizations, especially within the same industry, look and feel the same to work in. Sure, the offices may be carpeted in different colors, some may use Zoom versus MS Teams, they might swap out “Integrity” for “Accountability” in their values, but in all of the ways that matter, too many are nearly identical in experience. Far too identical, indeed, to actually hone the competitive advantage they intend to. It’s no surprise then how few strategies are ever fully realized. The culture, the “how” of strategy, was never intentionally designed or implemented.
Common Misconceptions of Culture
In addition, we think so many cultures are chasing parity because of a few common misconceptions about organizational culture:
- Engagement, alone, isn’t culture. Many large companies are obsessed with employee engagement (measuring it, training to understand it, intervening to improve it, etc.), without asking if they have the right employees in the first place or if engagement is being directed toward the right objectives. Engagement is a hygiene factor (you need it to do everything else) so it absolutely matters, but who you have in the organization and what they’re asked to do matters even more. An obsession with engagement can lead folks to treat culture just like strategy of yesteryear, simplistically thinking all they need to do is “build a good culture and the organization will succeed.” In a world of good products, and now even good engagement, culture requires deeper thinking and differentiation.
- Talent strategy, alone, isn’t culture. The pressure to recruit and retain talent is often what drives so many organizations in the same industry to offer similar experiences and benefits. Companies invest untold amounts of treasure and time competing in the “war for talent” just to create expensive revolving doors between competitors who increasingly have less and less to differentiate themselves. The alternative strategy is to grow more talent from within, though growing the right talent often seems harder than just buying it. But true strategic leaders know that the best talent (the talent that is primed to execute on your strategy) must be trained and developed regardless of where they come from.
- Organizations simply follow too many cultural fads. A decade ago, it was ping-pong tables in the office and “make the world a better place” mission statements. Today, you could argue that remote work, flattened hierarchies, the four-day workweek, agile practices, and lofty promises to repair societal divisions are fashionable trends that many organizations could be adopting too quickly or without deep understanding or interrogation. All could potentially play a part in a compelling strategy, but are they being pursued for that reason or because an in-group, the media, or a notable peer made them popular? In organizational culture, “What are others doing?” should never be asked in lieu of “What should we do?”
Designing an Intentional Culture
In terms of company cultures, it’s not just OK to be different, it’s strategic. Once you accept that, and the extent to which strategy and culture must be aligned, a few consequences emerge:
- Culture must be a part of the strategic planning process. If you aren’t considering how a strategy will be lived by your teams, then you’re ensuring that it won’t be. Once you’ve defined your strategic tradeoffs, the next step is to inventory what processes and systems (e.g. incentives, product development processes, individual performance rubrics, etc.) must change in order to reinforce those tradeoffs.
- A change in strategy requires a change in culture, and both are easier said than done. Culture change takes time, requires individual behavior change on a mass scale, and may even require staff turnover. The more that leaders can be targeted with the changes needed and well-trained in leading others through change, the faster and less disruptive the change will be to the organization.
- Cultures tend to drift over time, slipping away from their strategic objectives. Cultures that work to maintain their discipline are the ones that we consider legendary (e.g. Pixar, Netflix, Amazon, Zappos, Bridgewater, Southwest Airlines, etc.). But even legendary cultures eventually have to change, and the change (while necessary) can feel jarring, and can take considerable time to accomplish.
- Few organizations are skilled at strategy, fewer still are skilled at cultural change. Being one of the few who can do both is a compelling advantage in a world where not only is difference essential, but the longevity of that difference is ever-shortening.
Just as there was a time before strategic planning, we have left behind a time before intentional cultures. No longer is a “good culture” good enough to be competitive. Organizations today must find alignment between their corporate strategy and their corporate culture, or risk never fulfilling their competitive advantage. Instead of fads or media narratives, leaders must follow their own choices and tradeoffs in order to cultivate a unique culture; doing for culture what Michael Porter once described for strategy: “deliberately choosing to be different.”
